MONEY Microsoft

Why Microsoft Is Laying Off 18,000 People—During a Tech Boom

It's tough to be a desktop giant in a mobile app world.

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At a time when young social-media companies are being snapped up for billions and private investors seem eager to throw money at even kooky-sounding ideas—Yo!—Microsoft, that stalwart of the last great tech boom, has struggled to gain its footing. If you can call posting $5 billion in profits each quarter struggling. The upshot: A company that once seemed almost as if it could print money at will plans to cut 18,000 jobs over the next year.

What changed? While Microsoft once seemed to have locked up the PC market, the rise of smartphones and other mobile devices has opened up new avenues for competitors. Here’s how Microsoft lost it’s mojo in three charts:

Mobile killed the PC star

Microsoft earned a fearsome reputation in the ’80s and ’90s for locking up the personal computer market with its Windows operating system and productivity add-on Office. It even endured a painful antitrust case, when this feat seemed to give it an unshakeable grip on the computing sector. But then came the smartphone and the tablet. Today PC sales are declining. So while there’s a good chance you’re still using Windows in your cubicle at work, once you get home you’re watching movies on your iPad or playing games on your Andriod phone. PC sales have tumbled, something that’s only expected to continue. Fewer PCs, ultimately means, fewer copies of Windows and Office.

IDC Worldwide Quarterly PC Tracker, May 2014

Windows Phones haven’t broken through

Of course, Microsoft has tried to fight back. It’s newest version of Windows — Windows 8, released in 2012 — was designed to specifically to bridge the gap between PCs and tablets. But so far it’s failed to win many fans. Microsoft also tried to crack the smartphone market. It’s Windows Phone, released in 2010, has similarly failed to catch on. That’s one reason it acquired Nokia’s mobile phone division in April. Indeed, many of the layoffs will be tied to integrating this division. The jury’s still out on how the move will work, but Microsoft’s got a lot of ground to make up…

Operating system market share by unit shipments IDC

And Wall Street is demanding a change

The upshot is that a company which is still making money hand over fist — it’s got $88 billion in cash on its balance sheet — can look like it’s struggling. Life — or at least the stock market — is about keeping up with the Joneses.

YCharts

When the Joneses are Apple and Google, it’s not easy.

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